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Fathom’s quarterly index is out, and prices “eased” a bit (3%). Average keyword price is $1.39. From the release:

Following on the Q4 2005 holiday season, the drop in bids was not surprising given the seasonal nature of advertising.

Overall, the average bid has increased 1.4 percent since the September 2004 inception of the KPI when the average bid was $1.37. Although prices often vary dramatically day to day, average bid prices have settled in to a predictable range.

“Search marketing is growing at a robust 25 percent this year, and price stability helps that growth” said Matt McMahon, VP Marketing Services at Fathom.

13 thoughts on “The Keyword Index Is Out: $1.39, On Avg.”

This report continues to baffle me, and I don’t know why it gets so much attention…

1. Fathom Online outsources their Bid Management to Efficient Frontier, which makes me sceptical on their bid management capabilities
2. Their report does not take into account positional bid differentials, or relative CPV ratios. These prices effectively do not disclose at which position the CPC’s are disclosed for.
3. Google does not disclose relative bids, only your CPC. Assuming they have multiple clients on a keyword, they would need to be very careful in not creating bid wars, which would lead to a conflict of interest in preparing their click price index.
4. They are using their clients as a basis for these calculations – which raises the final point;
5. The prices in the index is being determined based by Fathom Online’s performance in the PPC market, not by the actual market prices.

For me, looking at an overall keyword index doesn’t tell me a whole lot. Beyond seeing an average or median keyword price, I like to see the breakdowns by industry, since there are usually a few industries that really skew the overall averages.

Even if the data is accurate, which it may be, it doesn’t reflect the overall growth in the market. As companies learn more about PPC bidding, they increase the # of terms they bid on. It’s becoming very rare that I don’t see ads on searches. That, plus the huge earnings growth from search companies demonstrates that even if avg $/click is down, overall spending is way up.

I applaud them for attempting to measure avg prices, but Vinny does poke quite a view valid holes in their methodology.

Hi John, I would be happy to participate in an interview with you to discuss the KPI and answer any questions you might have.

In the meantime, I would like to note to your readers that while Fathom Online does have a referral agreement with Efficient Frontier, which was announced in October 2004, we have built a robust search technology platform named Triton which we use for all data collection, validation, and reporting. More information on our technology can be found at http://www.fathomonline.com/content/products.html.

I’d also like to note that we do not use any of our client’s campaign performance data in our findings because, as Mr. Lingham asserts, we believe that this would skew our findings and lead to potential problems managing our clients campaigns effectively. Our findings are derived from independent analysis of market data.

As always noted in every release, the Fathom Online KPI tracks the price of keywords for the purpose of providing advertisers with background and benchmarks for comparison with their individual advertising campaigns. The data is not intended for creating financial assumptions related to search engine industry revenues. Fathom search marketing clients have access to the data including both the category data and the raw data.

You can call me Vinny! If you’re not getting your data from client accounts that you have access to, I’m sure that I understand how you are able to derive the click prices from Google, which represents the largest chunk of the market.

Their model’s pricing is closed to the open market, and unless you have a key to the black box, I’m not sure how it is even possible that you can gather this type of data accurately.

Even if you were aggregating 3rd party data, you still wouldn’t have access to the bid price that every bidder on a given keyword is paying, whether that be one or a million keywords.

I can understand if you say that the results are derived from Overture/Yahoo, but IMHO it would not be reflective of the overall market price, as Google’s pricing would not be included in that number.

I’ve had a look at the pages your referenced, but I’m still not sure how you got the numbers that you have published. Would you be willing to share the process that you used with us?

My name is Alison and I recently started working for a Pay-Per-Click firm that handles about 40 clients. I am very new to the business (and to web technology/Adwords), but have started to acclimate myself to the jargon, SEO techniques, etc. I was wondering, however, if you, or one of your readers, could assist me with the following?:

The number of impressions on Google have decreased significantly (over 100%) from Jan. 2006 – Oct. 2006, which in turn has both increased our keyword bids and increased our lead clients’ costs. Is there any method of combating this decrease in impressions and increase in costs, short of moving over to Yahoo, MySpace, etc.? Could you point us in a direction that will help us maximize our business potential while simultaneously keeping our clients’ costs a reasonable rate?